A contingency is a condition written into a real estate purchase and sale agreement that must be satisfied before the transaction can proceed to closing. If the condition is not met, the buyer typically has the right to walk away and recover their earnest money deposit — without penalty. For sellers, contingencies represent risk; for buyers, they represent protection. Understanding how each type works, and when to use or waive them, is essential to negotiating effectively in today’s Massachusetts market.

Contingencies are negotiated between the buyer and seller and documented in the Purchase and Sale Agreement (P&S) — the binding contract used in Massachusetts real estate transactions. Each contingency comes with a specific deadline. Miss the deadline, and you may inadvertently waive your protection. Knowing the rules is not optional; it’s how you avoid losing your deposit and your deal.

The Four Main Types of Real Estate Contingencies in Massachusetts

1. The Inspection Contingency

The home inspection contingency gives buyers the right to have the property professionally inspected — and to negotiate or exit based on what the inspector finds. In Massachusetts, the inspection typically takes place within 7–10 days of the accepted offer, before the Purchase and Sale Agreement is signed.

A licensed home inspector evaluates the property’s structural condition, roof, foundation, heating and cooling systems, electrical wiring, plumbing, and more. If significant defects are found, the buyer can:

Common findings that trigger renegotiation in the Massachusetts market include foundation cracks or settling, aging or deteriorating roofs, knob-and-tube or aluminum wiring, Federal Pacific or Zinsco electrical panels, failing HVAC systems, and evidence of water intrusion or mold. In towns like Reading, Lynnfield, and Wakefield — where a significant share of the housing stock dates from the 1940s through the 1970s — the inspection contingency is especially important. Older homes carry more deferred maintenance risk, and a thorough inspection can save buyers from costly surprises after closing.

In hot markets, some buyers consider waiving the inspection contingency to make their offer more competitive. A safer alternative is a pre-offer inspection — arranging for a licensed inspector to evaluate the property before submitting an offer. The buyer pays for the inspection out of pocket and takes on the risk that they won’t get the house, but if they do win the offer, they can waive the contingency with confidence rather than blind faith. This approach has become increasingly common in the North Shore market in recent years.

2. The Financing (Mortgage) Contingency

The financing contingency protects buyers who need a mortgage to purchase the property. It gives them the right to exit the transaction — and recover their deposit — if they are unable to obtain a mortgage commitment on the terms specified in the agreement. Standard language typically includes a specific loan amount, a maximum acceptable interest rate, and a commitment deadline — usually 21 to 30 days in Massachusetts transactions.

It is critical to understand the difference between a mortgage pre-approval and a full mortgage commitment letter. Pre-approval is a lender’s preliminary assessment based on your income, credit, and assets — it is not a guarantee of financing. The commitment letter comes after the lender has fully underwritten your loan, ordered the appraisal, and formally approved your application. Until you have a commitment letter, the financing contingency remains active — and your protection is in force.

Waiving the financing contingency — something buyers in ultra-competitive situations sometimes do to make their offer more attractive — carries significant financial risk. If you cannot close because your financing falls through after waiving this contingency, you forfeit your deposit. In Massachusetts, the standard deposit at the P&S stage is typically 5% of the purchase price. On a $750,000 home, that is $37,500 at risk. Only waive the financing contingency if you have documented liquid assets to cover the entire purchase price, or if you are a cash buyer who simply does not need a mortgage.

Buyers working with experienced local lenders who are familiar with Massachusetts transactions often obtain commitment letters faster, which can give them a competitive advantage — allowing for a shorter financing contingency window — without having to waive the protection entirely.

3. The Appraisal Contingency

When a buyer uses a mortgage to purchase a home, the lender requires an independent appraisal to confirm the property’s market value. The appraisal contingency protects buyers when the appraised value comes in below the agreed-upon purchase price — a situation known as an appraisal gap.

Here is how it plays out: suppose a home in North Reading goes under contract at $875,000, but the appraiser determines the market value is $830,000. The lender will only finance based on the $830,000 appraised value. The buyer is now facing a $45,000 gap. With an appraisal contingency in place, the buyer has several options:

In the current Massachusetts market, appreciation in high-demand communities like Lynnfield, Andover, and North Reading has at times outpaced what appraisers are willing to support based on recent comparable sales. This makes the appraisal contingency particularly relevant for buyers competing in bidding wars where the final price may push well above list.

For sellers evaluating offers: a buyer who waives the appraisal contingency is making a stronger commitment — they are essentially saying they will close regardless of what the appraiser says. But scrutinize the buyer’s financial profile carefully. A buyer who waives appraisal but has limited liquid assets may still be unable to close if a large gap materializes. Ask your agent to evaluate the full picture, not just the contingency language.

4. The Home Sale Contingency

A home sale contingency makes the purchase of a new home conditional on the buyer successfully selling and closing on their current home by a specified date. It protects buyers who cannot carry two mortgages simultaneously and need the proceeds from their existing home to fund the new purchase.

While this contingency is a reasonable protection for the buyer, it is generally the weakest type of offer from the seller’s perspective. Sellers in competitive markets — which describes most of the North Shore communities Susan serves — typically prefer offers without this condition, because a sale contingency introduces a chain of dependency: the transaction cannot close until a third-party deal (the buyer’s current home sale) also closes successfully.

If a seller does accept an offer with a home sale contingency, they will often include a right of first refusal clause (sometimes called a “kick-out” clause). This allows the seller to continue showing the home and accepting backup offers. If a better offer comes in, the original contingent buyer is given a short window — typically 48 to 72 hours — to remove the home sale contingency and proceed, or release the seller to take the new offer.

Buyers carrying a home sale contingency should be realistic about their timeline. Pricing your current home aggressively — and having it well-prepared for market before you begin shopping — significantly strengthens your position. It is also worth discussing bridge loan options with your lender. A bridge loan allows you to close on the new home before your current home sells, which can eliminate the need for this contingency entirely.

Massachusetts-Specific Practices Every Buyer and Seller Should Know

Real estate transactions in Massachusetts follow a distinct two-step contract process that differs from many other states. Understanding it clarifies when and how contingencies come into play.

The Offer to Purchase vs. the Purchase and Sale Agreement

In Massachusetts, the process begins with an Offer to Purchase (OTP) — a relatively brief document the buyer submits to reserve the property and establish the basic terms: price, deposit amount, closing date, and any major contingencies the buyer intends to include. The seller accepts, rejects, or counters. Once both parties sign the OTP, it is a binding agreement, but it is typically superseded by the more detailed Purchase and Sale Agreement within 10–14 days.

The Purchase and Sale Agreement (P&S) is where contingencies are formalized in legally precise language. This is the binding contract that governs the transaction through closing. The P&S specifies each contingency’s exact terms, deadlines, and what constitutes satisfaction or waiver of each condition. This is why having your own real estate attorney — not just a REALTOR® — is so important in Massachusetts.

Massachusetts Is an Attorney State

Unlike many states where title companies or escrow officers manage closings, Massachusetts requires attorneys to conduct real estate closings. Both the buyer and seller are each represented by their own attorneys throughout the P&S negotiation and closing process. Your attorney drafts, reviews, and negotiates the contingency language on your behalf. They also track all deadlines and ensure your interests are protected at the closing table.

Do not rely solely on your real estate agent to monitor contingency deadlines — your attorney should be your primary point of contact for contract matters, and you should be actively tracking dates yourself. Missing a contingency deadline, even by a single day, can waive a protection you thought you had.

Deposits: What Is at Risk and When

In Massachusetts, deposits are typically made in two stages. A small initial deposit — often 1–2% of the purchase price — accompanies the Offer to Purchase. A larger deposit, typically 5% of the purchase price, is due at the signing of the Purchase and Sale Agreement. Once the P&S is signed and all contingency deadlines have passed without the buyer exercising their rights, the transaction is considered firm — and that full deposit is at risk. Withdrawing from a firm transaction without legal basis exposes the buyer to forfeiture of their deposit and, in some circumstances, legal action for specific performance.

Navigating contingencies takes experience and local market knowledge.

Whether you’re crafting a competitive offer in Reading or reviewing a Purchase and Sale Agreement in Andover, Susan can help you understand exactly what you’re agreeing to — and which protections you should never give up.

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When Buyers Consider Waiving Contingencies

In a strong seller’s market — which has characterized much of the Massachusetts North Shore through 2024 and into 2026 — buyers competing in multiple-offer situations sometimes waive contingencies to make their offer more attractive. This is a calculated risk, not a routine strategy, and it should only be done with clear eyes about what you stand to lose.

Never waive contingencies as a reflexive competitive move. Always discuss the specific risks with your REALTOR® and your attorney before making this decision. What’s appropriate in a cash-rich, well-qualified buyer’s situation may be financially devastating for someone without deep reserves.

Strategies for Sellers: Reading the Contingencies in an Offer

When you receive multiple offers, the presence, scope, and terms of contingencies directly affect each offer’s real strength — and your risk exposure as a seller. An offer $25,000 higher with multiple long-window contingencies may represent less certainty than a slightly lower offer with limited or waived contingencies from a fully documented cash buyer or a well-qualified buyer with a local lender already deep in underwriting.

Ask your agent to present a side-by-side analysis of all offers that includes: the financing type (cash, conventional, FHA, VA), lender pre-approval strength, contingency terms and deadlines, proposed closing timeline, and any escalation language. This full picture is more valuable than the headline number alone.

How to Handle a Home Sale Contingency Offer

If you receive an offer with a home sale contingency in a market where you have other interest, consider countering with a right-of-first-refusal clause rather than rejecting outright. This keeps your property technically available while giving the contingent buyer a fair chance. If a better offer comes in, the original buyer has a defined window to remove their contingency and proceed — or step aside. In slower markets where contingent buyers are the primary pool, accepting a home sale contingency outright (with appropriate protections) may be the most practical path to a successful closing.

Contingency Deadlines and What Happens If They Pass

Every contingency in a Massachusetts Purchase and Sale Agreement comes with a specific deadline. These deadlines are not soft targets — they are legally binding milestones. Here is what you need to know:

Your attorney monitors these dates on your behalf — but mark them in your own calendar as well. The moment all contingency deadlines pass without action, your transaction is firm. Backing out after that point, without legal cause, means forfeiting your deposit. In extreme cases, Massachusetts law permits sellers to pursue specific performance — a legal action that can compel the buyer to complete the purchase rather than simply accepting the deposit as liquidated damages.

Working With the Right Team in Massachusetts

Contingency strategy is not a one-size-fits-all exercise. The right approach depends on your financial situation, your timeline, the specific property, and the competitive dynamics of the local market at the moment you are buying or selling. Having an experienced REALTOR® who knows the North Shore market intimately — and a knowledgeable real estate attorney — is the foundation of navigating these decisions well.

Susan Gormady has helped buyers and sellers navigate contingency negotiations across Reading, North Reading, Lynnfield, Wakefield, Andover, Melrose, Stoneham, Wilmington, Woburn, and Malden. Knowing the norms in each community — how competitive the market is, what buyers are typically waiving, how quickly inspections can be arranged — is knowledge that only comes from being active in the market every day.

Whether you’re a first-time buyer learning the process, an experienced homeowner moving up, or a seller weighing a stack of competing offers, understanding contingencies is one of the most important things you can do to protect yourself — and to position yourself for success — in the Massachusetts real estate market.